Thursday, May 31, 2012

Does the Legal Responsibility of Business Outweigh the Ethical Responsibility?

I’m really tired of hearing two particular phrases.

The first is that “government should be run like a business”.

The second phrase is that CEOs send jobs to “developing” countries because business is admittedly all about making money.  After all, they have a legal fiduciary responsibility to their share holders to do all that they can to turn a profit.  It’s as if there was a law forcing CEOs to make a profit which turns meanings of words like “community”, “patriotism”, “society”, “humility” and, in some ways, “reality”, around 180°. 

I challenge both of those arguments.

First of all, I’ll see their “government should be run like a business” and raise them one “business ought to be run like a society.” 

Secondly, is ensuring the riches of shareholders the only law that CEOs have to follow?  Are they the only people to whom they have a responsibility?  If CEOs and their sycophants get their way, it may end up the only law they have to follow.  However, as of this moment, they do have other legal responsibilities. 

It starts with “small business”

When asked, “So, what are you going to do with your life?”, a recent graduate might say, “I’m thinking of going into business for myself.”  How many people who make that statement know that the “for myself” part only lasts a short time?  Once that graduate turned entrepreneur hires someone, he or she has significantly affected the life of another human being.  The employer hasn’t affected that person’s life only in ways that pertain to work procedures, but in very personal ways as well.  The employer has asked the employee to leave her family and home for eight hours or longer. The employer asks the employee to trust him when he says he’s done everything in his power to ensure that the employee doesn’t get hurt on the job.  The employer asks the employee to put aside any chances she may have of pursuing her own interests so that she can pursue his interests - the employer’s interests actually become the employee’s interests.  Most of the time, in far too many cases, employers ask employees to refrain from enjoying certain personal pleasures.  Employers indirectly ask employees to go to bed at certain times so they can get enough rest to effectively and efficiently pursue their (the employers’) interests.  Employers can directly affect their employees’ relationships with family and friends by asking them to work during certain hours and on certain days.  They, in fact, may very well interfere with an employee’s religious beliefs by asking that employee to work on certain days.  It would be in this case that right wing business shills would insist upon strict adherence to the “American idea” of separation of church and state.

Many would say that’s why employees get a paycheck.  I would partly agree with that. 

As the business grows and the employer has to hire more workers, the employees are around their workmates more than they’re with their families in many cases.  They’re in the presence of their fellow workers longer than they’re with their extended families and their friends, for sure.  Some may be as close to workmates as they should be to their spouses.

Some owners of small businesses may not be interested in growing their businesses.  They may own one retail store or one music store or one restaurant.  They stay in business, even if they don’t expand, if they’re successful.  As those who own only one place of business are not usually publically traded, success is measured by how much profit their business makes and how much of the profit that owner uses to progress towards “the good life”.

This is wrong headed and is not success, even for small businesses.  We hear people in Congress fight regulations because regulations cause “small business owners” to fail.  We hear members of Congress fight against the minimum wage because a “small business owner” can’t afford to pay what large, publicly traded companies can pay.

One, members of Congress fight regulations and labor friendly legislation because large corporations pay them to do so.  If small business owners can’t pay their workers a living wage, how can they possibly find the money to lobby Congress?

The second lie is that small business owners can’t pay a living wage.  If one is to open a small business with no plan to expand, one should factor into success the satisfaction of one’s employees as well as the satisfaction of the customer.  There is no “legal fiduciary responsibility” to share holders for small businesses that are not publicly traded.  If one plans on starting a small business, one should not use the excuse that the business is too small to pollute the environment or too small to pay employees a living wage.  If one is researching the possibility of opening a small business, these questions should be addressed before one launches the business.  If one is going into business “for himself” and means that literally, he’s failed already.  If the only reason one goes into business is to collect large sums of money for himself or herself, the business is bound for failure.

This, of course, is an ethical failure, a failure as a productive and contributing member of society.  It’s certainly true that, if one owns a restaurant for ten years, goes through a multitude of wait staff, cooking staff, even dishwasher staff in those ten years, he could sell the business and may even be significantly wealthier than he was before he started the business.  However, if a person is serious about having a top quality restaurant, he must hire people who he can encourage to care about their jobs; actually own their jobs.  If he can instill pride in his workers and make it worth their while to stay with him for as long as he owns the restaurant, he may be even wealthier when he finally retires.  Customers can tell when people who wait on them are happy.  Customers can tell when there is never any complaint about the cleanliness of the business.  Customers tend to revisit places that have friendly atmospheres, good service and quality products. 

Nothing says quality to workers better than being appreciated for what they do to further the cause of their boss’s business.  However, if they’re paid what people in those positions are normally paid, they’re constantly looking for something better or they’re working second or third jobs, which takes energy and may very well adversely affect their performance at any one job or all of their jobs.  When people go home to the very basics while they know their boss is driving his Mercedes to his large, beautiful home, they may lose any interest in making life better for their boss.

Multinationals care even less

I am going to use The Dow Chemical Company as an example of how and why multinationals care even less.  I am going to use Dow because first, I worked for Dow for 25 years and, secondly, I know people who still work for Dow.  My intention is not to imply that Dow is any worse or any better than other multinational corporations.  It’s just that I can give examples based on what I know.

I began working for The Dow Chemical Company in 1972.  Obviously, communication technology wasn’t what it is today.  Consequently, although Dow had/has sites all over the world, it was broken down into divisions.  For example, I worked for Dow Chemical’s Eastern Division site in Connecticut.  I’m not certain whether the CEO ever visited our modest Connecticut site, but I do know that the Eastern Division Manager visited our site quite frequently.  It was an honor for us to see this manager up close and personal during those visits and we got to ask him questions, face to face.  Not only did we get the idea that he was listening to us, but it was obvious that he was.  We met with him and we brainstormed ideas to improve our plants and our work processes.  Some of those ideas were implemented either on a local plant/site level or on a division level.

Two facts should be kept in mind about this period of time.

First, Dow was working hard at shedding unions.  The site at which I was hired in 1972 was still litigating with the union which had called a wildcat strike in 1971.  The union ultimately lost - in the 1980s - but we employees had settled into the processes that Dow had put into place following the strike.  Many of these processes were actually employee friendly and many of us workers were naive enough to question what it was about Dow that the unions didn’t like.

Also, the income ratio between the CEO and those of us who actually made the products which made the profits was about 42-1.  We didn’t even give that ratio a second thought.  After all, the CEO had the responsibility to make profits, keep all of the production facilities in top running condition and to ensure that the employees were paid well for their efforts.  At that time the CEO and his staffs did a fine job of meeting those responsibilities.

Ronald Reagan was elected president in 1980.  Very shortly after that election, Reagan sent a message to the workers of America. The message was that our jobs were incidental to the main goal of making money for shareholders - the top shareholders.  He manifested this message by unilaterally firing the striking Air Traffic Controllers and their union.  Dow, like most large multinational “American based” corporations, started to see how far that “brave” move by Reagan diminished the importance of the worker and the workers’ surroundings.  

It was at that time that workers’ compensation began to flat line while income for the CEO and his or her top staff began to skyrocket.  By the time Dow “delayered” me (Orwell was a genius) in 1997, the site at which I worked, which had 500 employees when I began working there, had 130.  The CEO to worker ratio had gone from 42-1 to over 400-1.  Many of the products that Dow produced began to be produced in nations in which people were paid anywhere from $.50 per hour to $2 an hour.  Dow had never promised these people living wages or benefits and felt no need to open that can of compensation.  However, Dow, like many “American” companies, was beginning to find “success” in mergers and acquisitions.

In ’72, the year I began at Dow, not only did we hear from our CEO and other people at the top of the Dow food chain, but the message was that we existed for the customer.  The message was, if we were falling behind a competitor, we needed to put more effort into improving the quality of our product.  Hard as it is to believe, Dow even lowered the price of some of those products, even after the quality was improved.  We were told that this was how Dow was going to become more successful.

Today, by way of mergers and acquisitions, Dow’s philosophy seems to be similar to that of other companies.  It’s a sort of “if you can’t beat ‘em, buy ‘em” philosophy.  And, in truth, this is one way to stay “competitive”.  On the one hand, Dow has bought up competitors while, on the other hand, it has sold most of the businesses it owned in 1972.  It owns very few businesses in The FUSA which still produce products and which pay workers a living wage.  Most of the jobs once done by Dow Chemical employees at these sites are now negotiated out to contractors.

The day to day production technicians that work at these sites still make what would be considered a living wage, in spite of the fact that their wages have remained flat for thirty or so years.  They’ve continued to receive raises, but many of the raises aren’t even cost of living raises.

Meanwhile, Andrew Liveris, CEO of what’s left of Dow Chemical, pulled in $19,274,624 in 2011.  While the few American workers’ wages have remained flat and while Liveris, who, by the way, is an Australian, and other CEOs, have attended to the rest of their “labor situations” by sending that labor to slave labor nations, Liveris has pulled in over $19 million.

We have been told that, when a company’s profits are in the billions of dollars, $19 million is but a drop in the bucket.  If that is the case, what “American” global corporations were paying American workers before sending those workers’ jobs to slave labor nations must have been a drop in the ocean.  How could $30.00 an hour times however many workers these corporations had in The FUSA hurt competition if $9,134.62 per hour doesn’t hurt competition.  That’s $19 million divided by 52 divided by 40.  That’s assuming that the CEO works a forty hour week.  I would be surprised if the CEO worked a forty hour month.

Of course, with all global corporations, we concentrate on the CEOs compensations.  So, of the billions of dollars the company makes, $19 million doesn’t seem like a lot, I guess.  I see it differently.

However, the CEO of the corporation isn’t the only absurdly compensated officer.   

William Weideman, Dow’s CFO, pulled in $7,356,087 in total compensation.

Executive vice presidents Joe Harlan, Charles Kalil and Geoffrey Merszei received $7,461,526, $7,179,372 and $6,739,824, respectively (but, hardly respectfully).  How does that kind of compensation figure into a competitive business model?

Additionally, Dow Chemical, a company that doesn’t sell retail products to the general public, spent $25 million for their so-called, and oh, so ironic, “Human Element” ads.  Why does a company, who is putting American workers out of work, sending jobs to slave labor nations and putting almost no money back into its few remaining American sites, have to spend one red penny on television advertising, especially if the reason they’re hurting so many American “human elements” is to remain “competitive”?

Next time one of your Teabagger friends who just love politicians who are fighting for the “job creators”, despite the fact that he or she was, at one time, thrown out onto the street like a ripped up old rag by these very same “job creators”, says that she or he understands that CEOs have a legal fiduciary obligation to their stockholders and can’t play nurse-maid to American workers anymore; or says that liberals’ “taxes” are making them move their jobs to slave labor nations; or says that unions, none of which most of these companies had to deal with before sending their jobs to those slave labor nations, were making them non-competitive; or says that regulations are the reason these greed heads are hurting what should be their fellow American citizens, tell them that it’s time they started to think again or, possible, for the first time. 

When we look at the incomes of small business owners as compared to the incomes of the people who work for them or when we look at the incomes of the top officers of large, global corporations, we can see plenty of room for them to be more ethical with their profits, help save the American economy and still be exceedingly wealthier than their lowest tier employees.

To friendship,
Michael

“Change starts when someone sees the next step.” - William Drayton

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